Japan - Sri Lanka Tarde relations

The Embassy of the Democratic Socialist Republic of Sri Lanka

Trade Picture with Sri Lanka

The Japan is Sri Lanka’s one of the important trading partners, accounting for 3.8% of Sri Lanka’s total trade in 2016 and absorbing 1.9% of Sri Lanka’s total exports.

In 2016, Japan was the Sri Lanka’s 9th export destination preceded by USA, UK, India, Germany, Italy, Belgium, UAE and the Netherland and 5th largest import source preceded by China, India, UAE and Singapore. Sri Lanka account for very minute percentage of total imports to Japanese market (around 600bn imports of Japan).

In 2016, Sri Lanka’s exports to Japan dominated by Apparel (22%), Tea (20%), Fish(7%), coir textile fiber (7%), insulated cables (3%), table and kitchenware (3%). In 2016, Sri Lanka’s imports from Japan are mainly comprised of motor vehicles and transport equipment (56%), medical or surgical equipment (5%), Self-propelled mechanical shovels, excavators and shovel loaders (3%) as well as parts of motor vehicles (2%)

From 2006 to 2014, Japan imports from Sri Lanka continue to expand and declining in both 2015 and 2016. The major reduction was due to the declining of crustaceans exports (-70%) to Japan.

Japan-Sri Lanka Economic Policy Dialogue

During the visit of Hon. Prime Minister of Sri Lanka to Japan in October 2015, leaders decided to deepen cooperation in multifaceted fields under a “Comprehensive Partnership.” Considering the importance of economic growth and development of Sri Lanka, the two leaders decided to put particular focus on taking initiatives in (i) Promotion of Investment and Trade, (ii) Cooperation on the National Development Plan in Sri Lanka, and (iii) National Reconciliation and Peace building.

As mandated through the October Joint Declaration, the first Economic Policy Dialogue at the Senior Officials’ level was held in July 2016 to consider concrete measures for future enhancement of economic cooperation. Subsequent to this meeting, core groups from the two countries have established a Working Group to create a road map for Investment promotion to Sri Lanka.

Other Bilateral Instruments

Sri Lanka and Japan have entered into following bilateral instruments among other (Agreements/MoU) that has direct impact on trade and investment promotion.

  1. 1967- Avoidance of double taxation
  2. 1984- Investment Promotion and Protection
  3. 2014- Memorandum of Cooperation on the Vitalization of Intergovernmental Economic Policy Dialogue
  4. 2015-Agreement on Air Services (1984 Amended)

Sri Lanka’s Trade with Japan

1.1 Sri Lanka’s Exports, Imports, Total Trade & Balance of Trade with Japan

Sri Lanka’s trade with Japan, which is considerable in value, has shown fluctuations during 2004 to 2016. The total trade turnover, which stood at US$ 566.4 Mn. in 2004, gradually increased to US$ 1,602 Mn. in 2015 and then it has decreased to US$ 1,150 Mnin last years. The balance of trade with Japan is unfavorable to Sri Lanka, due to imports of motor vehicles, in particular. The total trade has significantly dropped in 2009 due to the global recession.

Sri Lanka’s Major Imports from Japan–2010-2015

(Values in US$ Mn.)

Year Exports Growth % Imports Growth % Total Trade Turnover Balance
2004 154.7 411.7 566.4 -257.0
2005 142.5 -7.8 379.7 -7.8 522.2 -237.2
2006 164.3 15.3 453.8 19.5 618.1 -289.5
2007 161.7 -1.6 413.4 -8.9 575.1 -251.7
2008 162.2 0.3 426.0 3 587.1 -262.7
2009 140.6 -13.3 223.9 -47 364.5 -83.3
2010 169.0 15.3 584.1 160 753.2 -415.0
2011 203.9 20.7 1,024.6 75.4 1,228.5 -820.6
2012 215.5 5.7 554.6 -45.9 770.1 -339.1
2013 224.0 3.9 670.2 20.8 894.2 -446.2
2014 235.9 5.3 941.1 40.4 1,177.0 -705.1
2015 213.7 9.4 1,389.2 47.6 1,602.9 -1,175.5
2016 200.2 -6.3 950.5 -31.6 1,150.6 -750.3

Source: Sri Lanka Customs

1.2 Export

Sri Lanka and Japan have entered into following bilateral instruments among other (Agreements/MoU) that has direct impact on trade and investment promotion.

  • Sri Lanka’s exports to Japan shows a fluctuating pattern during the past few years. Since 2010, the total Sri Lanka’s exports to Japan has increased gradually except in 2012 and increased to its highest level of US $ 235.97mn. in 2014 registering marginal growth of 4.6% as compared to year 2013.
  • However, it shows that the total exports have declined again by 6.3% from US$ 213 mn to US$ 200 mn in 2016.
  • With compared to last year, Apparel has becomed a dominant export item which accounts for 22 % of the total value of Sri Lanka ‘s exports to Japan in 2016. Tea has been the mainstay of Sri Lanka in the Japanese market for last years, however, tea export has been contuinted the same amount in 2015 and 2016 as well.
  • Other items of exports to Japan, were Crustaceans, Other vegetable textile fibres Coconut, abaca, Insulated wire/cable, Tableware, kitchenware, of porcelain/china, Fish, etc.

Sri Lanka’s Major Exports to Japan–2012-2016

(Values in US$ Mn.)

HS Code Description 2012 2013 2014 2015 2016 Share %, 2016
61 and 62 Apparel 27.14 38.78 47.98 39.42 44.67 22.32
0902 Tea 50.20 48.41 49.56 42.49 42.70 21.33
0306 Crustaceans, whether in shell or not, live, fresh, chilled, frozen, dried, salted or in brine ;cru.. 10.72 17.75 21.34 12.36 14.60 7.29
530500 Other vegetable textile fibres; paper yarn and wovan fabrics of paper yarn 10.55 13.58 11.49 12.34 14.08 7.03
8544 Insulated (including enamelled or anodised) wire, cable (including co-axial cable) and other insul.. 3.36 3.89 7.42 7.15 6.78 3.39
6911 Tableware, kitchenware, other household articles and toilet articles, of porcelain or china. .. 5.75 5.34 6.53 6.28 5.10 2.55
401290 Retreaded or used pneumatic tyres of rubber; solid or cushion tyres, inter-changeable tyre treads .. 2.70 3.88 3.68 4.93 4.39 2.19
250610 Quartz (other than natural sands); quartzite, whether or not roughly trimmed or merely cut, by saw.. 3.55 5.28 5.23 4.13 4.25 2.12
4016 Other articles of vulcanised rubber other than hard rubber. 6.24 6.02 5.70 4.72 4.11 2.05
400129 Crepe rubber 5.22 5.84 5.22 4.39 3.84 1.92
3802 Activated carbon; activated natural mineral products; animal black, including spent animal black. .. 5.63 3.07 4.21 5.68 3.80 1.90
96031030 Tawashi brushes made of 100% coconut fibre 3.38 3.53 3.40 3.41 3.42 1.71
080111 Desiccated Coconut .04 .02 .21 2.16 3.18 1.59
20011020 Gherkins preserved by vinegar/acetic acid 3.29 3.18 2.91 2.53 3.06 1.53
90 Optical, photographic, cinamatographic, measuring, checking, precision, medical or surgical instrument 4.74 4.67 3.92 2.52 2.00 1.00
Total 215.50 224.00 235.98 213.7 200.15 100.00

Source: Sri Lanka Customs

1.3 Import

  • Imports of Hybrid electric vehicles from Japan accounted for 21% of the value of total imports from Japan in 2016. However, imports of Hybrid electric vehicles, Motor cars and other motor vehicles principally designed for the transport of persons, other hybrid electric vehicles, Motor vehicles for the transport of goods etc. from Japan have been significantly in 2016 dropped due to the increase of import duty.
  • Other import items from Japan include Optical, photographic, cinematographic, Self-propelled bulldozer, Electro-medical apparatus, Plastics and articles thereof etc.

Sri Lanka’s Major Imports from Japan, 2012-2016

(Values in US$ Mn.)

HS Code Description 2012 2013 2014 2015 2016 Share %, 2016
87032251 Hybrid electric vehicles 24.61 96.16 389.10 370.75 202.63 21.32
8703 Motor cars and other motor vehicles principally designed for the transport of persons 99.19 197.71 88.49 329.34 126.30 13.29
87032353 Other hybrid electric vehicles 12.60 51.99 93.33 128.62 83.56 8.79
8704 Motor vehicles for the transport of goods 86.58 34.56 45.66 169.49 73.14 7.70
8702 Motor vehicles for the transport of ten or more persons, including the driver. 15.27 7.59 13.51 37.19 55.16 5.80
90 Optical, photographic, cinamatographic, measuring, checking, precision, medical or surgical instruments 20.53 20.22 23.99 31.97 31.29 5.36
8429 Self-propelled bulldozers, angledozers, graders, levellers, scrapers, mechanical shovels, excavators 27.61 10.23 13.03 24.54 29.93 3.29
39 Plastics and articles thereof 19.46 20.46 13.83 16.83 20.20 3.15
8708 Parts and accessories of the motor vehicles of heading nos. 87.01 to 87.05. 17.54 16.51 13.47 15.92 19.73 2.13
8452 Sewing machines, other than book-sewing machines of heading 84.40; furniture, bases and covers.. 1.86 8.03 7.53 10.99 15.31 2.08
8504 Electrical transformers, static converters (for example, rectifiers) and inductors. .58 .47 .75 .51 14.79 1.61
4002 Synthetic rubber and factice derived from oils, in primary forms or in plates, sheets or strip; mi 4.69 3.96 5.67 10.60 13.62 1.56
72 & 73 Iron and Steel and articles thereof 11.52 12.38 15.05 15.94 12.40 1.43
2523 Portland cement, aluminous cement, slag cement supersulphate cement and similar hydraulic cement 8.41 8.35 .02 2.27 11.69 1.30
Total 554.61 670.21 941.11 1389.24 950.46 100.00

Source: Sri Lanka Customs

1.4 Market Share (2015)

           Rank of Japan in Sri Lanka’s Trade Share %
Exports 10 2.08
Imports 03 7.31
           Rank of Sri Lanka in Japan’s Trade Share %
Exports 44 0.18
Imports 67 0.04

Source: Sri Lanka Customs, Trade Map

2 The possible Economic Partnership Agreement between Japan & Sri Lanka

During the visit of Hon. Prime Minister of Sri Lanka to Japan in October 2015, leaders decided to deepen cooperation in multifaceted fields under a “Comprehensive Partnership.” Considering the importance of economic growth and development of Sri Lanka, the two leaders decided to put particular focus on taking initiatives in (i) Promotion of Investment and Trade, (ii) Cooperation on the National Development Plan in Sri Lanka, and (iii) National Reconciliation and Peace building.

As mandated through the October Joint Declaration, the first Economic Policy Dialogue at the Senior Officials’ level was held in July 2016 to consider concrete measures for future enhancement of economic cooperation. Subsequent to this meeting, core groups from the two countries have established a Working Group to create a road map for Investment promotion to Sri Lanka.

3. Scope for expansion of Trade

  • Gem and jewelry
  • Tea
  • Apparel
  • Gloves of rubber
  • Activated Carbon
  • Vegetable fats and oil and fractions
  • Foot wear
  • Vegetables
  • Motor vehicle parts and accessories Ceramics
  • Electricity distribution panels
  • Food products
  • Software and IT
  • Printed circuits
  • Cement, ceramics, glass, and other mineral products
  • Insulated wires
  • Rubber and plastics products
  • Furniture
  • Yachts, motorboats, sailboats
  • Essential oils
  • Gaskets and other rubber articles
  • Bicycles
  • Fruit and nut preparations(coconut milk)
  • Activated carbon
  • Fishing and aquaculture
  • Solid Tyres
  • Tobacco products

4. Major Trade Fairs participated during 2016

  • International Jewellery Tokyo in January 20th to 23rd, 2016
  • International Jewellery Exhibition in Tokyo - August 26th to 28th, 2016
  • Sri Lanka Gem Festa Tokyo 2016
  • Diet & Beauty Fair Asia in Tokyo - September 07th to 09th, 2016
  • 12th Sri Lanka Festival held on 24th & 25th September, 2016 at Ariyake Park in Odaiba area in Japan
  • Health Ingredient Japan Exhibition 2016
  • GAEDEX 2016, 15th to 17th October 2016
  • Foodex 2016 in Tokyo

5. GSP facility provided by Japan

Japan’s Generalized System of Preferences (GSP) scheme grants preferential tariffs to certain developing countries under the Temporary Tariff Measures Law. Japan’s GSP started on 1 August 1971 and is effective until 31 March 2021. In 2001, Japan introduced various measures under its GSP Scheme, such as expanding the product coverage of tariff free, quota-free treatment for goods originating in LDCs. As a result, all textile and clothing products from LDCs enter Japan duty free.

The simple average GSP tariff rate is 4.9% (FY2012). Japan grants preferential tariffs under its GSP scheme to 138 developing countries including Sri Lanka for 337 agricultural and fishery products and 3,216 industrial products at HS nine-digit level. The GSP scheme excludes many agricultural products and certain industrial products.